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Gautama Pty. Ltd. is considering three alternative investment projects. The following information has been provided:...

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Gautama Pty. Ltd. is considering three alternative investment projects. The following information has been provided: Project A Project B Project C Initial investment 150,000 $185,000 $200,000 Expected annual net profit (loss): Year 1 $10,000 $15,000 $25,000 Year 2 $25,000 ($5,000) $40,000 Year 3 $10,000 $10,000 ($15,000) Year 4 $30,000 $25,000 $20,000 Estimated life 4 years 4 years 4 years Estimated residual value $50,000 $30,000 Desired rate of return 10% 10% 10% SO The company uses straight line depreciation. Required: a) What is the payback period for each project? (3 marks) b) What is the Net Present Value of each project? (6 marks) c) Based on your analysis in (a), (b) and (c) above, which is the better project to undertake? (1 mark)

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